Selling to Private Equity: What Founders Should Actually Expect
Written By: Ryan Morrison
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When a manufacturing or services business reaches meaningful EBITDA scale, the exit question shifts from whether to how and to whom. Most founders assume the strategic buyer's higher offer is the safer, more valuable outcome. Eric Wiklendt, Managing Director and Partner at Speyside Equity, argues that assumption gets the decision backwards for a significant share of sellers — and the data on what actually happens after corporate acquisitions supports his view.
Wiklendt spent the early part of his career in consulting and manufacturing operations before becoming CEO of a middle market manufacturing company, which he sold in 2011. He has been buying and improving companies at Speyside ever since. That path — from operator to buyer — gives him a perspective on what PE firms actually do post-close that most people on either side of the transaction rarely have.
TL;DR
Strategic buyers typically pay more than PE firms, but roughly 70-75% of corporate acquisitions fail to create value on a cash-on-cash basis because strategics overpay and cannot execute the synergies they modeled.
PE firms, particularly operator-led ones, generally want to preserve what founders built — the model depends on EBITDA growth, not on absorbing and eliminating.
Before entering any sale process, founders should map their desired post-close scenario: full exit, transition period, or continued operational role. That decision should drive buyer selection.
Continuation vehicles are a legitimate recapitalization tool for strong assets — but are increasingly used to manufacture liquidity optics on underperforming ones.
Specialist PE has historically outperformed generalist PE, with McKinsey data showing pooled IRRs of 17% vs. 13% across 2010-22 vintages.
PE Firms and Strategic Buyers Approach Acquisitions Differently
Strategic buyers and PE firms structure acquisitions differently because they hold fundamentally different assumptions about ownership. Strategic buyers assume perpetual ownership and model synergies; PE firms operate on a 5-7 year hold using leverage and target EBITDA expansion. That structural difference shapes every decision each buyer type makes after the deal closes.
A strategic acquirer uses a discounted cash flow model built on an assumption of holding the business indefinitely. Synergies — cost reduction, revenue growth, supply chain consolidation — are baked into the model and used to justify a premium price. Private equity works differently. The LBO structure means the firm uses debt to purchase the business, targets a specific hold period, and underwrites to a return on invested capital that requires meaningful EBITDA improvement within a defined window. There is no assumption of perpetuity. The model requires getting in, creating value, and getting out.
For founders, that structural difference matters because it determines what the new owner is trying to accomplish. A strategic buyer has a synergy agenda. A PE firm has an EBITDA agenda. Those sound similar but they play out very differently post-close.
Why Operator-Led PE Firms Work Differently Than Banker-Led Ones
Not all PE firms operate the same way, and the distinction matters significantly for founders evaluating buyer fit. Most PE professionals enter the industry from investment banking. Their training is transactional — financial statement analysis, deal structuring, valuation. That background produces firms that are strong at getting deals done and less focused on the operational realities of what comes next.
Operator-led firms like Speyside hire from a different pool. Wiklendt and his partners have worked in manufacturing companies at the C-level or done operating partner work in similar businesses for decades. As he described it: "We think about our firm as a firm for operators built by operators."
The practical consequence is integration. At banker-led firms, the deal team closes the transaction and a separate operating team takes over. The founder builds a relationship with one group of people during diligence and then works with a different group after close. At operator-led firms, the teams are integrated across the full spectrum. For founders who plan to stay involved post-close, that distinction affects day-to-day experience more than almost any other structural feature of the deal.
When evaluating PE buyers, founders should ask directly: does the investment team remain involved after close, or does a separate operating group take over? The answer reveals how integrated the value creation model actually is.
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The Case Against Automatically Taking the Strategic's Higher Offer
The conventional wisdom on strategic buyers is that they pay more, which makes them a better outcome for sellers. The second half of that logic — better outcome — deserves scrutiny. Research consistently finds that the majority of corporate acquisitions fail to create value on a cash-on-cash basis because strategic buyers systematically overpay and cannot execute the synergies they modeled.
A Fortune analysis of 40,000 acquisitions over 40 years found that 70-75% fail. The Harvard Corporate Governance Blog has drawn similar conclusions from decades of M&A research: acquirers pay premiums of 30-50% above market value, built on synergy projections that rarely materialize at the rate modeled. Wiklendt named the mechanism directly: commercial synergies — the top-line growth assumptions — get discounted 80-100% by strategic CFOs for good reason. They almost never come through. What strategics can execute is cost structure: SG&A reduction, plant consolidation, supplier rationalization, absorbing the target's salesforce into their own.
That execution pattern is where the cultural and operational disruption comes from. It is not a failure of intent — it is the playbook working as designed. Wiklendt was direct about the implication for founders: "What's interesting is that's actually more the strategic playbook than it is the private equity playbook." PE firms generally need the business intact to generate the returns they underwrote. Strategics need it absorbed to capture the synergies they modeled.
Tad Fallows and Sriram Gollapalli, the Navigating Wealth hosts, experienced this pattern directly when they sold their prior company to a strategic. Revenue was growing 40-50% annually before the acquisition. The new owner eliminated the sales team, eliminated the R&D team, and then asked why revenue had stopped growing.
When a Strategic Buyer Is the Right Answer
None of this means strategic buyers are the wrong choice for every seller. Wiklendt was clear about when strategics make sense: "Generally, if you want a full exit and don't want to be involved after, you should sell to a strategic." The price premium is real even if the synergy execution often isn't. If the founder's primary goal is maximum liquidity and a clean exit with no ongoing obligations, a strategic bid deserves serious consideration.
The calculus changes for founders who want continued involvement, who care about what happens to their employees and culture post-close, or who have strong opinions about the direction the business should take after the sale. For those sellers, the higher number on a strategic term sheet may not translate into a better actual outcome.
Three Exit Waypoints Every Founder Should Map Before the Process Starts
Before engaging buyers, founders should identify which post-close scenario they want — full exit, transition period, or continued operational role — because that decision should drive buyer selection, not the other way around.
Wiklendt described three waypoints:
The full exit. No ongoing involvement. The founder wants to step away and not think about the business again. In this case, maximum liquidity is the right objective and a strategic buyer often makes the most sense.
The transition exit. The founder stays for 6-12 months to transfer institutional knowledge, hand off key relationships, and ensure the new owner understands what makes the business actually work — not just what the financials say. This structure works with either buyer type but requires clear documentation of the transition scope and timeline.
The continuation vehicle orientation. The equity structure changes but the founder remains the primary operator. The business gets new capital and potentially new partners, and the founder continues running the company. This works well for founders who want meaningful liquidity but are not ready to leave what they built.
Founders often enter sale processes without having answered this question honestly, which creates misalignment that shows up later. As Wiklendt put it: "You really should be thinking about how do I partner with that private equity firm and what do I want from the situation."
Don't Surprise Private Equity Firms
One of the most consistently practical pieces of advice Wiklendt offered: communicate intentions early and give PE firms lead time. Almost any situation is manageable with 6-18 months of notice. The same situation surfaced at close creates problems that are difficult or impossible to solve without significant friction.
The situations he named — a founder wanting to retire at 60, a management team wanting to take money off the table at the next liquidity event, a CEO who wants equity participation but not an operational role — are all structurally solvable. They are only difficult when they arrive as surprises. "Don't surprise private equity guys. If you kind of tell us in advance, we can structure around it or figure it out."
The CEO who told Speyside he planned to retire at 60 illustrates how this works well. The conversation happened early. Speyside had time to plan for succession. At close, the CEO decided he wanted to roll equity without staying in an operational role. Because the groundwork had been laid, the accommodation was straightforward.
Deciding who to sell to is one of the highest-stakes decisions a founder makes — and most advisors are paid based on which deal closes, not on what happens after.
Long Angle members compare notes on exit decisions with peers who have been through the same process, without anyone in the room trying to sell them something. The Trusted Circles peer groups are matched by life stage and net worth — specifically for founders and operators navigating the complexity that comes with building something worth selling.
What a Continuation Vehicle Actually Is — and When It's the Wrong Tool
A continuation vehicle transfers a portfolio company from the GP's current fund into a new special purpose vehicle, giving existing LPs liquidity while the GP continues managing the asset under a recapitalized structure — but the structure serves both legitimate and problematic purposes, and the distinction matters for anyone evaluating PE funds or secondary opportunities.
The legitimate use case: the GP has a genuinely strong asset with meaningful value still to be created, but the current fund is reaching the end of its term and LPs need liquidity. The company needs additional capital to pursue a growth phase — acquisitions, new capacity, new markets — that the existing structure cannot support. The continuation vehicle addresses all three simultaneously. Existing LPs can either take their money out or roll into the new vehicle. New LPs come in at a negotiated entry. The GP maintains control and continues the value creation plan.
Wiklendt described this scenario directly. Speyside tripled EBITDA on one business through operational improvement over roughly three years, then recapitalized to fund seven acquisitions and five new manufacturing plants in the following 18 months. The continuation vehicle was the mechanism that let the company pursue the acquisition phase it had earned. Management got their LTIP paid out, received new equity grants, and got capital to execute a strategy they believed in.
The problematic use case is different in structure but similar in appearance. Some PE firms are using continuation vehicles to manufacture DPI — distributions to paid-in capital — because their LPs are starved for cash returns and the broader PE exit environment has been difficult. In these cases, the GP is moving a mediocre asset to a new vehicle at a questionable valuation, primarily to show realized returns on paper. As Wiklendt noted, this is increasingly visible in the market right now.
The pricing question is a common concern. Because the GP is effectively on both sides of the transaction, an independent fairness opinion is standard practice. The entry multiple for the new fund is typically derived from the asset's current EBITDA with a premium or discount negotiated based on the quality of the value creation plan. When the GP is delivering MOIC and IRR above industry average going into the continuation, the valuation discussion is straightforward. When the performance has been mediocre, the pressure on pricing is where the misalignment shows up.
For LPs evaluating a continuation vehicle opportunity, the right question is not just what the asset is worth today — it is why the GP is not selling the asset to an outside buyer at a clean arms-length price. A strong, well-run business with genuine remaining upside usually attracts external buyers. A continuation vehicle where the GP cannot demonstrate a clear reason why the next-step value creation requires their specific continued involvement warrants scrutiny.
For context on how continuation vehicles fit within the broader private equity secondary market, the Long Angle Private Equity Secondaries Investments Guide covers the LP-led and GP-led transaction landscape in detail.
Specialist vs. Generalist PE — Why the Distinction Matters
Specialist PE has historically outperformed generalist PE because sector experts understand the risks they're taking, not because the risks don't exist.
McKinsey's 2026 Global Private Markets Report found that specialist buyout funds generated pooled IRRs of 17% across 2010-22 vintages, compared with 13% for generalist buyout funds — with lower loss ratios as well. Commonfund's research corroborates the finding: specialists outperform generalists by approximately 1% relative to public markets, beating public benchmarks by 2.3% annualized.
Wiklendt frames the mechanism with a Steve Irwin analogy — the crocodile hunter could work with dangerous animals not because they weren't dangerous, but because he understood them well enough to manage the specific risks. Specialist PE works the same way. The firm's edge is not that manufacturing businesses are safer investments than others. It is that the partners have spent decades in those businesses, know where the value is, know where the problems hide, and know how to improve operations in ways that generalist investors with banking backgrounds typically do not.
The fee structure implications reinforce this. A generalist PE fund returning 13-14% gross, after paying 2-and-20 and absorbing the illiquidity premium, may not meaningfully clear the S&P 500 on a net basis. For founders choosing a PE partner and for LPs evaluating fund commitments, the question of whether a firm has genuine sector expertise — not sector familiarity, but deep operator-level knowledge — is one of the highest-signal inputs available.
Long Angle's 2026 HNW Asset Allocation Report shows that members with more than $10M in net worth allocate a meaningfully higher share to private and alternative assets than those below that threshold, with private equity representing the largest alternative allocation category. Understanding the specialist-generalist distinction is increasingly relevant as that allocation grows. The full allocation data is available here.
Manufacturing, Tariffs, and the 2025 Deal Environment
2025 was effectively a lost year for manufacturing investment because tariff uncertainty froze both capital expenditure decisions and M&A activity.
Wiklendt called it directly: "I call 2025 the lost year." The mechanism was the bullwhip effect of on-again, off-again tariff policy. Businesses that would have committed to new plants, new equipment, or new acquisitions held back because they could not model a stable input cost or supply chain structure. Consumer confidence fell. Business investment stalled. The decisions that create economic activity in manufacturing — buying a house, a car, a capital good — require a planning horizon that unpredictable tariff oscillations make impossible to establish.
His view on the underlying policy is more nuanced than a simple opposition to tariffs. He supports the strategic objective — correcting asymmetries in how the US is treated in global trade — but argues the tactical execution has created more damage than the underlying problem warranted. A consistent 4-year policy, even an aggressive one, is workable. Businesses can move manufacturing capacity within 6-18 months if the direction is clear. A policy that changes week to week produces paralysis.
The longer-term thesis for manufacturing remains intact in his view. Deglobalization trends favor North American production. Baby boomer business owners transferring $40-60 trillion in wealth over the next decade will create sustained deal flow in the lower and middle market. AI, robotics, and factory automation will allow manufacturers to expand output without proportional workforce growth — addressing the labor availability constraints that are real and persistent in the sector.
Frequently Asked Questions
What happens to founders after selling to private equity?
Most founders who sell to PE maintain operational involvement — especially if they roll equity — but shift from autonomous decision-maker to minority shareholder accountable to a board and a GP with a defined return objective. The degree of day-to-day involvement varies significantly by firm type. Operator-led firms tend to work collaboratively with management; banking-background firms tend to be more financially directive. Founders should clarify in advance whether they will work with the same team that did the deal or a separate operating group, and what the decision rights look like on capital allocation, hiring, and strategic pivots.
Do strategic buyers pay more than private equity?
Strategics typically pay more because they model synergy value into their bids, but research analyzing 40,000 acquisitions found that 70-75% of corporate deals fail to create value on a cash-on-cash basis after close. The mechanism is predictable: strategics overpay on synergy assumptions that rarely materialize at the modeled rate, particularly on the commercial side. Cost synergies — which typically come from SG&A cuts, plant consolidation, and salesforce absorption — are more achievable but often represent the disruption founders are most concerned about.
Should a founder sell to private equity or a strategic buyer?
Founders who want a full exit and maximum liquidity should lean toward a strategic buyer; founders who want continued operational influence, a more flexible post-close structure, and a partner more focused on growing the business than absorbing it should evaluate PE firms carefully. The decision turns on what the founder wants to happen after close — to themselves, to their team, and to the business — not on which number is bigger on the term sheet.
What is a continuation vehicle in private equity?
A continuation vehicle transfers a portfolio company from the GP's existing fund into a new special purpose vehicle, allowing current LPs to take liquidity while the GP continues managing the asset under a recapitalized structure. Done well, this mechanism enables a GP to continue value creation on a strong asset when the current fund's term is ending and LPs need distributions. Done poorly, it is a tool for manufacturing DPI optics on an underperforming asset. Independent fairness opinions are standard, and the entry valuation is typically negotiated relative to the asset's current EBITDA and the credibility of the forward value creation plan.
How does private equity create value after an acquisition?
Most operator-led PE firms pursue EBITDA margin expansion first — through operational efficiency improvements, better procurement, upgraded systems, and process discipline — before shifting to top-line commercial growth. Wiklendt described this as a two-phase model: Phase One focused on EBITDA margin improvement, Phase Two focused on sales growth. The sequencing matters because sustainable top-line growth requires operational stability underneath. Inorganic growth through acquisitions is a common Phase Two lever, particularly for platform companies being scaled through bolt-ons.
What size business makes sense for private equity?
Most lower middle market PE firms have a revenue floor around $50 million for platform acquisitions — below that threshold, companies typically lack the processes, systems, and management depth to support scalable improvement under PE ownership. There are buyers for smaller businesses, but they tend to be pursuing bolt-on strategies, early-stage growth equity, or search fund structures rather than classic LBO-style control investments. The right size threshold depends heavily on the PE firm's specific strategy and what they are trying to build.
How do you evaluate a private equity firm as a potential buyer?
Ask whether the investment team remains involved post-close or hands off to a separate operating group — that transition is where founder relationships most commonly break down. Ask for references from management teams at portfolio companies, not just from the GP's preferred contacts. Understand where the firm is in its fund cycle, because a GP who just raised a new fund has different incentives than one who is 6 years into a 10-year fund and needs to show exits. And assess whether the firm's background is operator-rooted or banking-rooted, because those orientations produce meaningfully different post-close working relationships.
Final Thoughts
The PE versus strategic decision looks like a price comparison from the outside. From the inside, it is a question about what the founder actually wants to happen — to their business, to their team, and to their own role — after the check clears. Getting that answer right before the process starts is more valuable than any negotiating leverage in the process itself.
Wiklendt's central point is not that PE is always better than strategic. It is that the conventional wisdom — take the higher offer — is built on assumptions about what strategics deliver post-close that the data consistently does not support. Founders who understand how each buyer type actually creates value, and who have honestly mapped their own post-close preferences, are in a fundamentally stronger position than those who start with the term sheet.
The decisions that come after building something valuable are different in kind from the decisions that got you there.
Long Angle is a private, vetted community of founders, executives and investors who compare notes on exactly these decisions — exits, capital allocation, PE diligence, advisor selection — without anyone in the room with a commission motive. Members have compared notes on concentrated stock positions, negotiated continuation vehicle terms, and stress-tested PE buyer references with peers who have worked with the same firms.
Exit decisions benefit from peer context more than almost any other financial decision a founder makes. The people who have been through it recently are usually the most useful source of signal — and the hardest to find outside of a community built for this stage.
